Malaysia Budget 2020 Highlights

KUALA LUMPUR (Oct 11): The following are the highlights of Budget 2020:

• Civil servants' cost of living allowance or COLA to be raised by RM50 a month starting 2020 for support group, with an additional RM350 million a year
• Civil servants will be allowed early redemption of accumulated leaves (gantian cuti rehat) for up to 75 days as replacement pay for those who have served at least 15 years

• Public Sector Home Financing Board to offer free personal accident insurance for up to two years to new government housing loan borrowers
• The Bureau of Public Complaints will be replaced by the Malaysian Ombudsman to enhance govt's governance and delivery systems
• Govt to move forward with the formation of the Independent Police Complaints and Misconduct Commission (IPCMC) to increase public confidence and trust in police.
• Govt to allocate RM330 million to the Property and Land Management Division under the Prime Ministers Department to repair and maintain the public service quarters. Meanwhile, RM150 million and RM250 million is set aside to repair and refurbish Malaysian Armed Forces family housing units (RKAT) and PDRM quarter

• Govt intends to proceed with the Rapid Transit System (RTS) between Johor Bahru and Singapore.
• ​It will also invest RM85 million beginning 2020 to ease congestion at the Causeway and 2nd Link by enhancing vehicle and traffic flow through the Customs, Immigration and Quarantine Complex.

• To support local medical device industry, government will introduce an initiative to encourage local producers to upgrade equipment and tools used in public clinics and hospitals, based on a minimum allocation of 30%.
• Govt announces RM500 special payment for civil servants Grade 56 and below. Govt retirees to get special payment of RM250, also extended to non-pensionable veterans
• RPGT base year for asset purchase revised to Jan 1, 2013 for asset acquired before that date
• Fire fighters to get a special allowance of RM200 a month, which will benefit 14,400 personnel under the Fire and Rescue Dept, amounting to RM35 mil.
• Allocation for Defence Ministry raised from RM13.9 billion in 2019 to RM15.6 billion in 2020

• RM450 million proposed to acquire up to 500 electric buses for public transport in selected cities nationwide
• Bandar Malaysia project will now include a People's Park, with 5,000 units of affordable homes and greater Bumiputera participation. Proceeds from the project will be valued and announced in due course, and will be used to reduce 1MDB's debts.
• Overall debts and liabilities ratio to GDP lowered to 75.4% in 2018 from 79.3% in 2017, but is expected to rise to 77.1% as at end-June 2019. This is largely due to the increase in the committed government guarantee to continue to MRT and Pan Borneo Highway, and RM20 billion bailout of Tabung Haji. Govt saved at least RM46 billion in capex from rationalising megaprojects including LRT3, MRT 2 and ECRL.
• Govt will sell assets (approved previously) via competitive bidding to realise their potential; this is expected to generat more than RM3 billion revenue in 2020.
• Japan Bank for International Cooperation (JBIC) offers to guarantee additional tranche of Samurai bonds with lower interest rate of less than 0.5% compared with 0.63% previously. The federal government plans to issue the bonds early next year. Issuance size to be determined after further discussion with JBIC.
• Govt to pay RM2.4 billion to service 1MDB and SRC International's debt interest in 2019, and a further RM2.7 billion in 2020

• To curb illegal gambling, govt proposes a higher minimum mandatory penalty of RM100,000 for illegal gamblers, along with a minimum mandatory jail sentence of six months.
  • For illegal operators, a higher minimum mandatory penalty of RM1 million and a 12 month minimum mandatory jail sentence will be imposed.
• Starting 2020, total number of special draws for Numbers Forecast Operator (NFO) will be reduced from 11 to 8 times a year.
• Health Ministry to get RM30.6 billion allocation, compared to RM28.7 billion under Budget 2019
• Govt will merge Special Commissioner of Income Tax and Customs Appeal Tribunal into the Tax Appeal Tribunal, to be operational in 2021. Through this, taxpayers unhappy with the decision of IRB director-general or the Customs D-G can appeal

• Home Ministry to receive RM16.9 billion boost for 2020.
• Govt has repaid GST refunds amounting to RM15.9b to more than 78,000 companies, and income tax refunds of RM13.6b to 448,000 companies and 184,000 taxpayers
• Allowance for KAFA teachers increased by RM100 a month, to benefit 33,200 existing teachers
• Allocation for Islamic affairs under PM's Dept increased to RM1.3 billion from 1.2 billion in 2019
• Govt proposes that a new band for taxable income in excess of RM2 million be introduced and taxed at 30%, up 2 percentage point from the current 28%. This will affect approximately 2,000 top income earners in the country.

• Govt will continue to ensure at least 30% of tenders of each ministry are reserved for only Bumiputera contractors
• The Cabinet has approved the proposed offer to acquire four highways in the Klang Valley – Shah Alam Expressway (KESAS), Damansara-Puchong Expressway (LDP), Sprint Expressway (SPRINT) and SMART Tunnel (SMART) to be funded via Government-guaranteed borrowings.
• Govt to extend Youth Housing Scheme administered by Bank Simpanan Nasional from Jan 1, 2020 until Dec 31, 2021. The scheme also offers a 10% loan guarantee via Cagamas to enable borrowers to get full financing and RM200 monthly instalment assistance for the first two years, limited to 10,000 home units.
• To reduce supply overhang of condominiums and apartments amounting to RM8.3 billion in the second quarter of 2019, govt will lower the threshold on high rise property prices in urban areas for foreign ownership from RM1 million to RM600,000 in 2020.

• Individuals owning not more than two cars and two motorcycles can get fuel subsidy for one vehicle. The qualifying criteria are:
  • A passenger car with 1,600cc engine capacity and below, or
  • Any car above 1,600cc must be more than 10 years old, or
  • A qualified motorcycle must be 150cc and below, or
  • Any motorcycles above 150cc must be more than 7 years old.
• RM100 million grant proposed for Malaysian Indian Transformation Unit (MITRA) of which 80% will be programme-based
• Effective Jan 1, 2020, toll rates for cars at the Second Penang Bridge will be reduced from RM8.50 to RM7.00.
• RM57 million provided to Orang Asli Development Department (JAKOA), in addition to RM83 million allocation for the community’s economic development, education and infrastructure.

• MySalam to be expanded so that those with critical illnesses will get RM8,000 cash; those being treated in govt hospitals can also claim RM50 wage replacement a day for up to 14 days
• Citizens to enjoy average 18% discount on all PLUS highways
• RM575 million proposed for socio-economic assistance to senior citizens benefiting 137,000 seniors whose household income is below poverty level
• Govt to allocate RM60m for pneumococcal vaccination for all children
• RM25 million allocated to manage, administer and expand food bank programme

• RM227m to be set aside to upgrade medical equipment, and RM95m to renovate infrastructure and medical facilities, like in Hospital Pontian
• RM1.6 billion to build new hospitals and upgrade existing ones. The hospital includes Tengku Ampuan Rahimah Klang, Hospital Kampar, Hospital Labuan and the Queen Elizabeth II Hospital, Sabah Heart Centre.
• Govt allocates RM1 billion in investment incentives to attract Fortune 500 companies and global unicorns
• RM319m to build and upgrade health and dental clinics and quarters facilities; new clinics will be built in Setiu, Sg Petani, and Cameron Highlands, as well as Kudat and Tawau in Sabah, and Lon San and Sg Simunjan in Sarawak
• Hiring fresh graduates: Two-year pay incentives of RM500 a month. Hiring incentive of RM300 a month.

• Allocation for subsidies and social assistance increased to RM24.2 billion, including welfare aid such as Bantuan Sara Hidup (BSH). BSH scheme expanded to cover 1.1 million single individuals aged above 40 earning less than RM2,000 per month.
• Incentives to get women into the workforce:
  • Two-year pay incentive of RM500 a month
  • Hiring incentive of RM300
  • Tax exemption for women returning to work will be extended until 2023.
• RM1 billion set aside for rural roads throughout Malaysia, primarily targeted at Sabah and Sarawak
• Malaysians who replace foreign workers will get a monthly wage incentive of RM350/RM500 for two years, depending on the sector. Employers will get a monthly incentive of RM250 a month throughout the same period.

• RM587 million allocation for rural water projects, of which RM470 million will be for Sabah and Sarawak
• RM500 million for rural electrification benefiting more than 30,000 rural households, majority in Sabah and Sarawak
• Allocation for TVET programmes raised from RM5.7 billion in 2019 to RM5.9 billion in 2020
• Govt plans to double special alowance for Sabah to RM53.4m and Sarawak to RM32m; this to be doubled further to 106.8m for Sabah and RM64m for Sarawak in five years
• RM25 million allocated to Malaysia Healthcare Tourism Council to strengthen Malaysia's position as the preferred destination for medical tourism in Asean for oncology, cardiology and fertility treatments.

• RM10.9 billion allocated for rural development projects in 2020, from RM9.7 billion in 2019
• RM1.3 billion proposed for education institutions under MARA, a further RM2 billion for student loans benefitting 50,000 students
• Allocation for Agriculture and Agro-based Industry Ministry increased to RM4.9 billion, including RM150 million to support plant integration programmes such as for chilli, pineapple, coconut, watermelon and bamboo.
• RM735 million proposed for school maintenance and upgrading works

• Budget 2020 has four thrusts including boosting economic growth in new economy and digital era, investing in people.
• Approved foreign direct investment has inreased to RM80.1 billion in 2018 from RM54.1 billion in 2017.
• Govt has set up National Committee on Investments (NCI), chaired by Minister of Finance and Minister of International Trade and Industry
• Govt to offer special investment incentive package worth RM1b per year for five years to local companies capable of penetrating overseas market
• Additional RM10m allocation to be set aside for MITI to increase monitoring to ensure approved investments are realised
• Government evaluating Carey Island development feasibility for next growth phase

• Proctrated trade war offers Malaysia unique opportunity to become choice destination for FDI with high added value
• Government allocates RM210m to expedite digital infrastructure establishment in public buildings like schools
• Mandatory Standard on Access Pricing (MSAP) has successfully reduced broadband prices by 49% and increased speeds by three times
• Govt intends to develop a 100-acre logistics hub at Special Border Economic Zone at Kota Perdana in Bukit Kayu Hitam to strengthen trade relations with Thailand
• RM250m will be set aside by MCMC to prepare broadband access via satellite technology to increase connectivity in rural Malaysia, especially Sabah and Sarawak
• National Fiberisation & Connectivity Plan will adopt public-private partnership approach involving total investment of RM21.6b

• Matching grant fund of RM25m will be set aside to encourage more pioneer digital projects that benefit fibre optic infrastructure and 5G
• RM20m allocated to MDEC to groom local champions in producing digital content
• RM50 million grant to develop 5G ecosystem to prepare for 5G transformation worldwide
• 50% matching grant of up to RM5,000 to increase the digitalisation of operations for Malaysian small and medium enterprises (SME)
• Smart automation matching grant (up to RM2m) for 1,000 local manufacturers and 1,000 services companies to automate business processes

• To boost use of e-wallets, govt to offer one-time RM30 digital stimulus to qualified Malaysians aged 18 and above with annual income less than RM100,000
• 14 one-stop digital improvement centres to be set up in every state to faciltiate access to financing, development of business capacity
• RM10m to be set aside for MDEC to train micro-digital entrepreneurs and technology experts to leverage e-market places, social media platforms
• RM445m Bumiputera entrepreneur development grant for access to financing, provision of business premises, entrepreneurship training
• Digital Social Responsibility (DSR) is commitment from business sector to enhance workforce with digital skills needed by society. Contributions from the private sector to the DSR will be given tax exemptions.
• RM50m allocation proposed to encourage SMEs to engage in more export promotion activities
• Govt to provide loans worth RM100m under Small Industries Entrepreneurs Financing Scheme for Chinese community

• Islamic Economic Blueprint to be formulated to position Malaysia as centre of excellence for Islamic finance
• Govt to provide RM20m in loans under entrepreneur development scheme for Indian community
• RM20m allocation for Cradle Fund to train and offer grants to high-impact technology entrepreneurs
• Government allocates RM210m to expedite digital infrastructure establishment in public buildings like schools
• Govt to provide extra RM50m for SC's My Co-Investment Fund (MyCIF) to assist SMEs that have difficulties in getting financing
• Licensing for digital banks to be opened for public consultation by year end. A framework is expected to be released in 1H2020
• Government to up e-sports allocation to RM20m due to high potential

• RM200m set aside for 'Bantuan Musim Tengkujuh' to eligible rubber smallholders under RISDA, Lembaga Industri Getah Sabah
• Govt to allocate RM500m as guaranteed facility for women entrepreneurs via Syarikat Jaminan Pembiayaan Perniagaan Bhd (SJPP)
• Skim Jaminan Pinjaman Perniagaan will be enhanced, with the government guarantee raised to 80% of the loan amount while the guarantee fee is reduced to 0.75%. A RM500 million guarantee facility has been set aside especially for women entrepreneurs.
• RM738 million provided for Risda and Felcra to implement income generating programme

• SME Bank will introduce two new funds: a RM200m fund specially for women entrepreneurs, and a RM300m fund to support SMEs with potential to become regional champs
• RM1.1 billion allocated to Ministry of Tourism and Culture, of which RM90 million is specifically for VMY2020 promotion and programmes
• RM100 million allocated for Rubber Production Incentive in 2020 to enhance income of smallholders faced with low rubber prices
• Ministry of Entrepreneur Development to give RM10 million for advisory services and awareness for the halal industry
• R&D in public sector to be intensified with RM524 million allocation to ministries, public agencies
• Digital bank licensing framework will be finalised by Bank Negara and open for application in the first half of 2020

• Ceiling on Market Development Grant (MDG) by Malaysia External Trade Development Corporation (Matrade) raised to RM300,000. Cap on entry to export exhibitions also raised to RM25,000. RM50 million allocated to encourage SMEs to join promotional activities.
• RM855 million allocation under Federal Government Padi Fertilizer Scheme to boost padi yield
• Tax incentives for venture capital and angel investors will be extended until 2023
• Govt to contribute RM100 million towards construction of new cable car system to Penang Hill
• Govt jobs worth RM1.3b dedicated for Bumiputera contractors
• Govt proposes to raise minimum wage in urban areas to RM1,200 a month in 2020

• Govt to allocate additional RM50 million to Malaysia Co-Investment Fund (MyCIF) to benefit equity crowdfunding platforms and peer-to-peer (P2P) financing platforms.
• Govt to contribute RM100 million towards construction of new cable car system to Penang Hill
• Govt to merge Bank Pembangunan Malaysia, Danajamin Nasional, SME Bank and EXIM Bank Malaysia to restructure development financial institutions (DFI)
• Govt to launch Malaysians @ Work initiative aimed at creating better employment opportunities for youth and women, reducing over-dependence on low-skilled foreign workers
• Special Islamic Finance Committee to be set up to develop the Islamic finance ecosystem

• Govt revises Employment Act, including increasing maternity leave from 60 days to 90 days from 2021
• An allocation of RM810 mil for Federal Land Development Authority (Felda) settlers, including boosting their water supply and roadwork upgrades, and programmes to increase their earnings.
• Green Investment Tax Allowance (GITA) and Green Investment Tax Exemptions (GITE) extended to 2023 in line with sustainable development.
• Govt has launched palm oil replanting loan fund worth RM550m for smallholders
• Govt to implement B20 biodiesel for the transport sector by end-2020. This is expected to increase palm oil demand by 500,000 tonnes per annum.
• Education Ministry to receive largest allocation of RM64.1 billion in 2020 from RM60.2 billion in 2019
• Govt expects to collect RM244.5 billion in revenue in 2020, an increase of RM11.2 billion from 2019, after excluding one-off Petronas special dividend of RM30 billion

Source: The Edge